In Latin America and the Caribbean, millions of people face significant challenges in accessing quality jobs. Although many governments have expanded programs to promote labor market insertion—especially for vulnerable populations—over the past decade, results have not always met expectations. In this context, exploring innovative solutions to improve the effectiveness of employment policies has become increasingly urgent.
One of the most promising approaches is results-based financing (RBF), a model that aligns providers’ incentives with the objectives of public employment policies, promoting greater flexibility, efficiency, and a focus on real impact.
What is results-based financing?
RBF links payments to service providers with the achievement of specific, measurable outcomes. Instead of paying for inputs or activities, such as training or employment counseling, governments and organizations compensate providers based on the results achieved, such as job placement and employment retention. For example, a provider does not receive payments for the number of workshops or training sessions delivered, but for how many people actually secure quality jobs and remain in them for a defined period.
This approach encourages efficiency, innovation, and adaptability in service delivery. Its implementation requires attention to technical and financial aspects, such as indicator design, payment metrics, and budget planning.
A growing approach in Latin America and the Caribbean
Results-based financing (RBF) for employment programs is gaining traction in the region. Countries such as Argentina, Colombia, and Costa Rica have implemented programs through performance contracts, in which payments depend on meeting specific outcomes, and social impact bonds, which incorporate private investment to finance public programs with the condition that funds are reimbursed only if agreed-upon results are achieved.
In Colombia, important steps have also been taken toward institutionalization. For example, a national results-based financing fund and a payment-by-results committee within the Bogotá government have been created—mechanisms that help overcome the constraints of traditional budgeting and allow resources to be executed beyond the fiscal year.
The IDB Group’s role in promoting this innovative model
At the IDB Group, we actively support the expansion of RBF in the region. We work closely with governments, investors, and service providers to design and implement programs, offering technical and financial assistance and promoting knowledge exchange and good practices.
BID Lab’s Más Pago por Resultados program (formerly Sibs.Co) has been a pioneer in Colombia, generating evidence on the model’s effectiveness and helping mobilize resources from the private sector and international cooperation. We are also supporting Costa Rica’s Ministry of Labor and Social Security (MTSS) in developing and implementing RBF pilots within the Empléate Program, aimed at people living in poverty and unemployment.
A practical guide for policymakers
To support these efforts, our publication Toward More Effective Employment Policies: Opportunities of Results-Based Financing presents concrete examples of programs in Latin America and the Caribbean, as well as from other regions, together with key lessons learned and a detailed practical guide for policymakers interested in developing RBF programs in the employment sector. The guide is structured into four key phases:
- Predesign: Assess the relevance of the RBF model in the specific context, identify necessary minimum conditions, and select the most appropriate mechanism.
- Design: Define the target population, establish governance, distribute financial risk, and design the intervention scheme.
- Operation: Strengthen providers’ technical and management capacities, expand and energize the provider market, and offer financial support during implementation.
- Verification, Monitoring, and Evaluation: Implement solid mechanisms to verify the achievement of results, monitor provider performance, and promote evaluations that generate learning and continuously improve employment policies.
Results-based financing is a promising strategy to strengthen the effectiveness of employment policies in Latin America and the Caribbean. Many policymakers in the region are interested in this approach; however, innovation is never easy, and challenges exist. The good news is that valuable lessons already exist and can help guide the way forward.
This publication was created to leverage those lessons and support policymakers who want to adopt this model as a strategy to generate more and better employment opportunities.
Download the publication here and discover how RBF can help create quality jobs and improve lives across our region.